Product differentiation is a key feature of:
Options
APerfect competition
BMonopoly
CMonopolistic competition
DOligopoly
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Price Determination in Different MarketsPYQ - July 2021Question 79 of 20
All Questions Correct Answer
✅ Option c — Monopolistic competition
All Options:
- APerfect competition
- BMonopoly
- CMonopolistic competition
- DOligopoly
Detailed Solution & Explanation
To determine the correct answer, let's break down the key features of each market structure.
• Product differentiation refers to the process of making a product unique in some way, so it is distinct from other similar products.
• This concept is closely related to the market structure where many firms compete with each other, but each firm has some degree of price-setting power due to its unique product.
• In monopolistic competition, firms produce differentiated products, which enables them to have some control over prices, as their products are not perfect substitutes for other products in the market.
The correct answer is based on the definition of monopolistic competition, which is characterized by many firms producing differentiated products.
• In contrast, perfect competition is characterized by many firms producing homogeneous products, so it does not involve product differentiation.
• Monopoly and oligopoly also involve some degree of product differentiation, but they are not the best matches for this concept, as they are characterized by a single firm or a few firms, respectively, rather than many firms competing with each other.
About This Chapter: Price Determination
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Perfect Competition, Monopoly, Monopolistic, Oligopoly
This high-weightage chapter covers all four market structures: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly. Students learn how price and output are determined under each structure, along with key concepts like Price Discrimination, Kinked Demand Curve, and the conditions of equilibrium (MR = MC).
View Official ICAI SyllabusExam Strategy Tip
This chapter carries the highest weightage (~15%). Focus on features of each market, the shape of AR and MR curves, and understand why firms in Perfect Competition are 'Price Takers' while Monopolists are 'Price Makers'.
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More Questions from Price Determination in Different Markets
Under which of the following forms of market structure does a firm have no control over the price of its product?
A firm encounters its "shutdown point" when:
Kinked demand curve hypothesis is designed to explain in context of oligopoly
Which of the following is not a characteristic of a "Price Taker"?
Price discrimination will be profitable only if the elasticity of demand in different markets is:
Which of the following is not an essential condition of pure competition?
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